Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

Obtaining, Managing, and Returning Title IV Funds

PublicationDate: 7/1/95
ChapterNumber: 4
ChapterTitle: Obtaining, Managing, and Returning Title IV Funds
SectionNumber: 5
SectionTitle: Maintaining Funds
PageNumbers: 99-102


((New regulations))
Cash management regulations published December 1, 1994 that
became effective July 1, 1995 contain new guidelines that schools
must follow to adequately manage federal funds. These include the
following areas.

4.5.1 Bank Accounts

A bank account into which ED transfers or a school deposits Title IV
program funds must meet certain federal requirements. (Funds
received from the Federal Family Education Loan [FFEL] Program
are excluded from the requirements.)

((Perkins Loan funds))
For any award year, a school that participates in the Federal Perkins
Loan Program must maintain Federal Perkins Loan funds in:

- an interest-bearing account that is

- federally insured or

- secured by collateral of value equivalent to the amount of
Title IV program funds in the account OR

- an investment account that consists predominantly of low-risk
income-producing securities, such as obligations issued or
guaranteed by the United States government. If a school
maintains federal funds in an investment account, the account
must remain sufficiently liquid to make required disbursements to
students.

((Other Title IV funds))
A school that does not participate in the Federal Perkins Loan
Program must maintain other Title IV program funds in an interest-
bearing account if it does not meet the criteria listed in the next
paragraph. If applicable, the account must meet the same just-cited
requirements.

For any award year, a school is not required to maintain an interest-
bearing account if:

((Exceptions to interest-bearing account requirement))
- the school drew down less than $3 million from Title IV programs
in the prior award year;

- the school earned less than $250 in interest on the total amount of
Title IV program funds that it drew down in the prior award year
and maintained in an interest-bearing account; OR

- the school demonstrates by its cash management practices that it
would not earn more than $250 in interest by maintaining in an
interest-bearing account the total amount of Title IV program
funds that it will draw down during the current award year.

((Non-interest-bearing accounts))
A school's non-interest-bearing account must be:

- federally insured OR

- secured by collateral of value equivalent to the amount of Title IV
program funds in the account.

((Separate Title IV bank account))
A school is not required to maintain a separate bank account for Title
IV program funds. However, a school may be required to maintain
all Title IV program funds in a bank account that contains no other
type of funds if ED determines that:

- the school's accounting and internal control systems do not

- identify cash balances of Title IV program funds maintained in
the school's bank account as readily as if those funds were
maintained for each program in a separate account, or

- identify adequately the interest or investment revenue earned on
Title IV program funds maintained in the school's bank account;
OR

- the school's financial records

- are not maintained on a current basis,

- do not accurately reflect all Title IV program transactions, or

- are not reconciled at least monthly; OR

- the school has otherwise failed to comply with recordkeeping and
reporting requirements required by applicable federal regulations.

((Designating federal funds in accounts))
Regardless of the type of account or number of accounts in which a
school maintains Title IV funds, the school must properly indicate
that the account(s) contain federal funds. A school may meet this
requirement by:

- notifying its bank of the accounts that contain federal funds and
retaining a copy of that notice in its records OR

- ensuring that the name of the account clearly discloses that federal
funds are maintained in the account.

A school need only notify the bank once that its account(s) contain
federal funds, unless the school changes its bank account(s).

((UCC-1 statement))
In addition, a school must file a UCC-1 statement (which discloses
that the account contains federal funds) with an appropriate state or
local government entity; the school must maintain a copy of this
statement in its records. The format and content of these forms vary
from one state to another. Blank UCC-1 statements are available
from local legal office supply stores. In addition, UCC-1 statements
and information about filing them are available from the State
Corporation Council or Secretary of State located in your state.

Although this is an ED requirement, ED will not take adverse action
against an institution that does not file a UCC-1 statement, IF the
institution is either backed by the full faith and credit of a state (in
the case of a public institution) or if the institution inserts the word
"Federal" in the name of its bank account containing Title IV aid
funds (such as, ABC School Federal Account). Conversely, a non-
public institution that either chooses not to insert "Federal" in the
name of its bank account containing these funds, or is precluded
from doing so, must file a UCC-1 statement.

4.5.2 Interest Earnings

((Returning interest earnings))
A school must remit to ED, at least annually, the interest or
investment revenue earned on Title IV program funds maintained in
an interest-bearing or investment account. There are two exceptions
to this rule:

((Retaining interest earnings))
- A school may retain and use all interest or investment revenue
earned on Federal Perkins Loan Program funds for authorized
purposes of the Federal Perkins Loan Program.

- Other than interest or investment revenue earned on Federal
Perkins Loan funds, a school may retain up to $250 per year of the
interest or investment revenue earned on Title IV program funds
to cover the school's administrative expenses.

Procedures for returning interest income to ED are discussed in
section 4.8.2.5.

Last Modified: 06/30/1995